“Tata Motors Limited Q4 Earnings Conference Call” May 18, 2021 MANAGEMENT: MR. GUENTER BUTSCHEK – MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER, TATA MOTORS LTD MR. THIERRY BOLLORE – CHIEF EXECUTIVE OFFICER, JAGUAR LAND ROVER MR. PB BALAJI – GROUP CHIEF FINANCIAL OFFICER, TATA MOTORS LTD MR. ADRIAN MARDELL – CHIEF FINANCIAL OFFICER, JAGUAR LAND ROVER MR. GIRISH WAGH – PRESIDENT (COMMERCIAL VEHICLE BUSINESS), TATA MOTORS LTD MR. SHAILESH CHANDRA – PRESIDENT (PASSENGER VEHICLE AND ELECTRIC VEHICLE BUSINESS), TATA MOTORS LTD Page 1 of 25 Tata Motors Limited May 18, 2021 Moderator: Ladies and gentlemen, good day, and welcome to the Tata Motors Q4 Earnings Conference Call. As a remainder, all participant lines will be in listen-only mode. During the course of the presentation, if any participants intend to ask questions, they can use the chat-box option appearing at the bottom of the screen to submit their questions to the speakers. All questions will be taken up at the end of the session. Please note that this conference is being recorded. I now hand over the conference to Mr. Prakash Pandey from Tata Motors. Thank you and over to you, sir. Prakash Pandey: Thank you. Good evening, everyone. Hope all of you and your family members are healthy and safe during these uncertain and unprecedented times. On behalf of Tata Motors, I warmly welcome you all for our Q4 FY 2021 results conference call. Today, we have with us Mr. Guenter Butschek – MD and CEO, Tata Motors; Mr. Thierry Bollore – CEO, Jaguar Land Rover; Mr. PB Balaji – Group CFO, Tata Motors; Mr. Adrian Mardell – CFO, Jaguar Land Rover; Mr. Girish Wagh – President (Commercial Vehicle Business); Mr. Shailesh Chandra – President (Passenger Vehicle and Electric Vehicle Business); and all our other colleagues from the Investor Relations team. Like always, we will start the session with a quick overview of the financial and business performance from the management, followed by Q&A. Over to you, Balaji. PB Balaji: Thank you. Thanks, Prakash. Firstly, a warm welcome to all of you. Thanks for taking the time. As Prakash said earlier, I hope all of you are safe and sound. The presentation has already been uploaded into the investor portal, and therefore I'm presuming all of you had a chance to take a look at it and also have it in front of you. We will refer to the page numbers and move forward with speed. Can we have the next slide, please, this is the Safe Harbor statement, move to the next one. An intense period of product actions, as well as company actions that you saw in Jaguar Land Rover. Defender, of course, we are going to talk a lot about Defender here today, winning the World Car Design of the Year. And now almost 12 out of 13 nameplates are now electrified and you were there when the Reimagine strategy and Refocus transformation was announced, and we will talk about that later as well. We will be concluding charge in this , this generated GBP 6 billion of lifetime savings, one of the most successful projects in the automotive world, and very happy with that. In Tata Motors, of course, we did see significant product interventions post BS VI. And at this point in time, what is really happening is customers starting to experience the product and really giving us excellent feedback, which is also reflected in our market share, particularly in M&HCV and LCV. Tata Safari, the Legend was Reborn. Of course, it's a strong response into the market and PV has been a standout performer with Shailesh is going to talk about even more. And the cost savings target we had indicated Rs. 6,000 crores for the year, we ended up at Rs. Page 2 of 25 Tata Motors Limited May 18, 2021 9,300 crores, a strong performance there as well. And the promoters have completed their funding, the remaining outstanding warrants have been exercised. Next slide. From a performance perspective, for the quarter, a strong all-around performance despite the pandemic, if you look at the full year. Full year EBITDA of almost Rs. 30,000 crores. But if I look at the closer going into Q4, the EBIT number that you see of 7.3% the highest rate that we would have seen in the last many quarters. We ended the year with a strong cash flow for the quarter as well as for the year being a positive free cash flow. And overall, EBITDA margins have picked up. And if you look at the full-year number, EBITDA has improved despite a decline in revenue, or volume, increase which tells you that the business is getting intensively more stronger. And the implication of a strong business, what does it do when revenues come through is seen in Q4. That's how we would like to see the business today. Next slide. The numbers are there obviously, but call out the net automotive debt. We have called out the deleverage plan when we announced it in the AGM. Happy to report that for the current year we are lower than what we had closing debt last year. And every quarter, we have been reducing our net debt level, and that is something which we are quite happy about. What are the three things which are a bit different to the rest of the floor, which is the traditional P&L analysis? First is JLR where we called out the Reimagine-led changes that we are doing to our strategy, resulting in a one-time non-cash write-down of GBP 0.95 billion. And a restructuring cost of about GBP 0.6 billion. And this will impact us in FY 2022, but even then we will deliver a breakeven cash flow. But this is an important pivot that we have done to the business, and therefore these write-downs that we have taken will actually help us form a strategy perspective to go fully into the electrification model. And Thierry and Adrian may want to talk more about it. This will also give us a credit going forward in terms of a lower D&A charge of GBP 150 million per annum. And also, the headcount savings here, we are looking at about 2,000 headcounts, that will result in savings of close to GBP 100 million per annum. Despite these write-downs, the net worth continues to be strong at GBP 5.3 billion. So, that is the first one of the exceptional items. In the case of TML PV, there is a sweet news, where the strong performance of the business, it's a significant improvement, even well ahead of our own internal expectations. And outlook remaining strong thanks to the pandemic and our performance both together. We have reversed the impairment that we have taken same period last year of ~ Rs. 1,200 crores. We also had an onerous contract provision for volume from one of the vendors, that is also being reversed. And therefore, this business is now well and truly performing to the extent that we want. And of course, more to be achieved as well. PV subsidiarization, we had the shareholders meeting as well as the secured creditors meeting and got approval for that. We are awaiting the final NCLT approval, which is now scheduled on June 14th, and we are hoping to get their approval from there, and promoters have already talked about this. Page 3 of 25 Tata Motors Limited May 18, 2021 With this, let me hand it over to Adrian to quickly run us through the key highlights of JLR performance. Adrian, over to you. Adrian Mardell: Many thanks, Balaji. Good afternoon, evening to you all on the call. So, same format for us. Exactly as Balaji said, first half was the weak half and we had a strong second half performance, particularly in Q4. The 7.5% you see there, EBIT in Q4 was mostly and overwhelmingly underlying performance. So, really pleased with that. You see the PBT GBP 500 million and the big free cash flow as well, GBP 729 million. Full year results on the right, where you can see dramatic improvement over the previous year, even though FY 2020 was impacted partially in quarter four if you recall. Next slide, please. So, these are the headlines below that, we will get into revenue details later in the presentation. Balaji has talked about the exceptional item, and we will go through the walks on cash flow as we normally do. Next slide, please. An important point I want to make on the exceptional, because I don't want to repeat what Balaji said was, look, our assessment at the end of the year was very close to the preliminary assessment we made on February the 26, GBP 1.5 billion. And just to remind you, those products – MLA-mid – did not fit in to the Reimagine strategy. They would not leapfrog competition and we are all about being the best of the best, not just competing. So, that's why we took the really difficult and emotional decision to cancel those programs. We are still working through the restructuring costs beyond the headcount of 2,000 people, and that's mostly about getting the right positions and the right people into the organization with the right skill sets. That's management grades, now more people with specialist skills, which is fundamental to success in this environment. Next slide, please. A busy one, but we wanted to show you several flavors of the retail data. Q4 at the top, full year below, you can see the highlights and study it in your own time.